austin3515

Now that Tagdata has endorsed, you I just might tout your name! Kudos to you for having the most creative name on the board. Funny they didn't say "would you get your answers from Tom Poje, author of the nondiscrimination and answer book..." or Kirk Maldonado of the "Maldonado letter.."

Gotta read the plan's provisions on rehires. It is possible that he is immediately, or he may have to wait a year. The Plan should be specific on this.

Yes, you would need to recalculate vesting, and yes if they forfeited too much, you would need to make them whole. With IRS correction procedures (rev ruling 2003-44) you need to make a "full correction" which means you need to go back to day 1 oft he Plan to make people whole. You could probably debate how many years to go back though, but it should be at least 3 (i.e., years still open for audit). If it's a smaller plan, without a lot of distributions, I'd go back as far as possible.

"So does it matter if the definition of YOS violates ERISA?" Your kidding, right?

I don't know... Elapsed time means the amount of time elapsed from hire date to termination date. Under elapsed time, I think they should have three years (i.e., just over 3 years of service between DOH and DOT). I don't think you can require a complete calendar year. What's more if you look at the DOL regs on creditting service I'm, just about certain you will find that you cannot have a last day requirement for purposes of creditting a year of service. In eligibility, you can require employment on the entry date to enter the Plan, but that's it. The year of service can still be creditted on the last day of the Plan Year, but it can't be conditional upon employment. I'd check out the DOL regs...

The IRS...

As a TPA, we apply to sponsor a prototype, and the opinion letter is addressed to us, as the TPA?

If they were on a prototype document with the old TPA, wouldn't they have to adopt the current TPA's plan? I thought once the TPA whose prototype you adopt is no longer in the picture, you can't rely on the opinion letter?

1) yes, but it's on the lost earnings, not the full amount of the deposit. A BIG difference. Earnings is essentially determined based on the greater of the underpayment of taxes rate in 6621(a) (published quarterly) or the best performing fund (assuming you don't want to calc. earnings separately for each participant). 2) The excise will not be waived. Although I'm sure the IRS wouldn't be too happy about this is far and away a DOL issue, and it should be corrected as described in the DOL's VFCP, and not the IRS correction program.

I'm with DTROM, it's because of the ambiguity that you need to shoot for the 3/28 date. As the old addage (sp?) says, better to be 10 minutes early than 2 minutes late... Hopefully Corbel will get an answer from the IRS and soon!

Shoot! I just read Corbel link and I now walk away with my tail between my legs...

IRS Notice 2005-5 says you don't have to process anything until 12/31/05, and if you don't and that is contrary to your plan, you won't be treated as in violation. So don't do anything after 3/28/05 until you decide what you are going to do. Are you guys aware of this provision in the notice, or am I missing something?

Assuming your a calendar year, you don't have to amend until 12/31/05. IT says so right in the IRS Notice. Why are you saying amend sooner? Because the IRS allows you to defer making the mandatory distriubtions until 12/31/05, and the amendments not due until then, you have until then to make up your mind. Of course, no matter what, no more mandatory cash-outs, they must be rollovers post 3/28. Or am I missing something? Won't be the first time, so please do tell...

See IRS Notice 2005-5. Amendments are due the last day of the Plan Year ending after 3/28/05. So if your calendar year plan, you have until 12/31/05 to make the amendment. In my opinion, that means you have until 12/31/05 to make up your mind.

All contributions count so it does sound like your limited to people w/ less than 2 years. I'm not clear though on whether you imposed the 1,000 rule. Did you know that is not allowed for the top heavy minimum? You can have a last day rule though. With respect to the people who were shorted because of the definition of comp, the correction is to give them what they should have gotten (i.e., the difference) and adjust it for earnings. See the IRS correction program in 2003-44, which I think has a section on failing to provide the THM. I don't think your allowed to self-correct under the program if it's over a year old, which just means that the IRS can give you a hard time for not submitting the correction under the walk-in programs if the Plan was audited. It's obviously very expensive to do a submission to the IRS, so the sponsor will probably opt to self correct anyway.

There are some twists to it... 1) Watch out for top heavy, because the Plan won't be exempt. 2) Watch for HCE's with less than a year of service (i.e., owners, owners spouses, or owners kids), because you'll need to run ADP testing for portion of the Plan covering just the people with < 1 year. But otherwise yes...

You need to look at the definition of comp. 401(k) is definitely out, but my understanding is that with profit sharing it's a bit grayer. If you use W-2 comp, and this item isn't excluded (although I think it generally is, something about Sect. 83 property?), then it's a definite maybe... These post-"termination" payments are always an interesting topic!

I agree whole heartedly (absent a close call on an audit requirement). I think that the initial set-up fees that were discussed above were those of setting up the arranement for all future rollovers, i.e., a cost that will benefit participants for years to come. That would be difficult to charge to participants. How much would you charge? If the custodian has a "per account" set-up fee, than clearly that could be paid from the former participant's account balance.

Nice one mbozek! There's always something. I read through the long list of benefits specifically prohibitted, and none of the seemed remotely similar to this. This sounds like the kind of thing the IRS might like, I would think? IF the goal is to get American's to save more, this seems like a harmless way to encourage savings... Maybe a private letter ruling is in order? Kidding, of course...

LEarn something new every day... If you opt not to give the 3% SHNEC to all NHCE's, you've blown your top-heavy exemption. This might actually be a good thing, because although you need to use full year comp (instead of comp while a participant), at least you can use a vesting schedule...

The ruling is only 2 pages, and written in a very straight-forward manner... http://www.unclefed.com/Tax-Bulls/2004/rr04-13.pdf 1) Forfeitures = NO top heavy exemption... 2) The answers do not change at all regardless of whether the SH plan uses the 3% SHNEC or the SH Match.

If you remove the provision, or decrease the limit to $1,000, you need not worry about this stuff. Of course you will need to worry about growing participant counts and admin fees, potential audit requirements, etc. NEvertheless, my understanding is that at least in the short-term, many sponsors are taking this route.

DC Plan has J&S language and provides a few different forms of annuities as options. Right now we have to manually set up an excel template, unique for each client, to calculate the estimated annuity amounts for each option available. Obviously very time consuming. Is anyone aware of any software packages that will calculate this automatically (outside of Relius or some similar system)? What do other people do with this situation?

Keep in mind also that if you disaggregate into statutory and otherwise excludable employees, the otherwise excludables do not need to receive the gateway. See what your "topping off the tank" amendment says.

You don't need to give everyone the 3%. See my post above!!